Connecticut educators are warning that the state’s use of federal stimulus funds to fill in the state’s budget deficit may create a long-term financial shortfall for public schools.

When lawmakers approved the $37.6 billion budget in September, the spending plan included a $540 million reduction in state funding over two years for kindergarten through 12th grade education. They replaced those budget cuts with one-time federal stimulus aid and flat funded the state education grants for the next two fiscal years to help preserve about 5,000 teaching positions in Connecticut, state officials said.

However, educators warn that if Connecticut’s economic recovery languishes and state tax revenues continue to falter, the eventual end of stimulus aid in 2011 could leave a $500 million shortfall for local school districts.

“I’m extremely worried,” said John Yrchik, executive director of the Connecticut Education Association. “It’s not really clear at this point whether states like Connecticut will see sufficient recovery in their revenues to be able to replace the funds that are being lost. No one really has a plan for replacing stimulus money when it goes away.”

In a recent report issued by the U.S. Education Inspector General, Connecticut and two other states were singled out for reducing their K-12 education budgets and using stimulus funds to fill in the gaps. The report pointed out that the move could adversely affect education achievement reform.

Gov. M. Jodi Rell wrote a letter in response to the report to U.S. Department of Education Secretary Arne Duncan, defending the state’s use of the federal aid, saying it is “entirely consistent with the requirements of the American Recovery and Reinvestment Act of 2009.”

Thomas Murphy, spokesman for the state Department of Education, said that the budget cuts “would be difficult to restore unless the economy recovers.”

Business groups agree that the legislature took a gamble when they balanced a projected two-year, $8.7 billion budget deficit with one-time funding in hopes that an economic recovery would replenish the state’s coffers by 2011.

While there have been some signs of an economic recovery, Yrchik said state and local revenues tend to significantly lag behind any progress in the national economy.

Comptroller Nancy Wyman has predicted the two-year budget approved in September is already $624 million in deficit.

Municipal Woes

Future cuts to education funds would adversely impact poorer cities the most since their budgets tend to rely heavily on state aid. Hartford, for example, funds nearly half of its $395 million education budget with $187 million in state grants.

“If the economy doesn’t improve, we could suffer a decrease in state aid and that would be a problem,” said Steven Adamowski, Hartford’s superintendent of schools. “We are projecting two difficult years ahead.”

Earlier this year, Hartford cut its education budget by $21 million due to increases in utilities and school transportation costs and contractually obligated pay raises, forcing the district to eliminate 250 positions, including 99 teachers.

The state provides most of its K-12 funding through Education Cost Sharing (ECS) grants. In fiscal 2009, those funds totaled $1.9 billion, or 10 percent of the overall state budget. The state reduced its funding for fiscals 2010 and 2011 by 14 percent, to $1.62 billion for each year, and then used a total of $540 million in federal aid to flat fund the grants to 2009 levels.

Prior to this year, the state increased ECS grants by 13 percent in fiscal 2008 and 4.4 percent in 2009.

Still Struggling

Even with the federal money, municipalities are still struggling.

With increases in standard operating costs, flat funding from the state is forcing cities and towns to shoulder more of a financial burden.

In New Britain, the city’s education budget has become more reliant on ECS grants. As the state boosted its share of funding in recent years, New Britain reduced its local tax contributions for education from $42.8 million in 2006-07 to $36.2 million in 2008-09, said Sharon Beloin-Saavedra, president of the city’s board of education.

In July, the city approved a $118 million education budget for the 2009-10 fiscal year, with ECS grants making up $73 million of the spending plan. Stimulus funds contributed to $10.5 million of the ECS funding, which helped to flat fund the city’s state aid from the prior year.

Without that money, Beloin-Saavedra predicts the New Britain school system would have lost 200 positions.

But even with those funds, contractual obligations still put the city $5 million over budget, so they had to negotiate concessions with union and nonunion employees to make up for the shortfall.

“I don’t know what we are going to do if ECS grants are reduced in the future,” Beloin-Saavedra said. “How many times can you go to employee groups and ask for concessions?”

Yrchik said the CEA has lost 350 members as a result of the elimination of positions in school districts.

“Even with the state coffers being replenished with stimulus funds, we saw a loss of teaching positions in Connecticut for the first time in years,” Yrchik said. “If there is no replacement when stimulus funds go away, that suggests the overall effect is going to be devastating.”